Here’s What The GST Tax Structure Means For Car Buyers in India

GST has been the talk of the town for quite some time now when it came to the automotive sector, because it was expected to bring the prices of small cars down, which in turn, would have helped in growth of the sector as a whole and at the same time, made it easier for people to buy cars.

Now, a four-tier taxation system has been announced which has been finalised at – 5 percent, 12 percent, 18 percent and 28 percent. Currently, small cars (less than 4 metres in length) are taxed at around the 30 percent mark and automakers were hoping that the cars, upon the implementation of GST, will fall under the 18 percent tax slab.

This means that whenever GST is implied, small cars will more or less cost the same.

Whereas the government did say that all cars will fall in the 28 percent tax slab, it also added that “luxury cars” will attract “additional cess” and green tax as well, thus, increasing the overall taxation on these cars. Currently, larger cars are taxed at around 50 percent. The government has not defined the “additional cess” nor have they defined the parameters that would make a car fall into the “luxury car” segment. So as of now, it can’t be surely said whether sedans and SUVs are getting cheaper due to lack of clarity, but given that these cars will attract additional tax on top of the 28% tax slab, expect it to be priced similarly to their current price.

When asked about the taxation structure on automobiles, Finance Minister Arun Jaitley said, “There is a difference between cars and luxury cars. Cars will come under 28 per cent, but luxury cars owners can afford to pay a little more” to PTI.

If the definition of small cars remains the same as the existing parameters – which would require cars to have less than four metres in length and have an an engine displacement of less than 1200cc for petrol and 1500cc for diesel – then the likes of the Renault Kwid, Maruti Suzuki Alto, Hyundai i10, Tata Tiago, Volkswagen Polo and Ford EcoSport will fall under the 28% percent tax slab